Friday, 20 May 2011

Correcting The Wealth Gap

Keen on the Victorian Age? Well, we're heading back there, according to the new report of the High Pay Commission. The commission, which was set up last November to look in to the ever-rising gap between high and low pay in the UK, predicts that if current trends continue, then by the year 2030 Britain will be witnessing levels of inequality not seen since the beginning of the 20th century.

The commission found that in 2010 the average annual salary of FTSE-100 chief executives was more than £3,747,000 - that's a whopping 145 times the national median full-time wage of £25,800. Furthermore, within 20 years, the top 0.1 per cent of UK earners will see their pay rise from five to 14 per cent of national income. Almost everyone agrees that the such enormous inequalities are undesirable. The question is, what can we do about them?

One way of making Britain a more equal society would be for David Cameron and George Osborne to suddenly embrace communism, nationalise the entire economy and have the state fix wage levels. But while the uber-right commentator Simon Heffer once accused Osborne of acting like "some member of the Socialist Workers Party" for urging that bankers be paid less, there's little chance of the prime minister and his chancellor singing a chorus of the Internationale at the next Tory party conference.

There is a way though that Cameron and Osborne could make Britain more equal - one which would be fully in line with the traditions of their party. Prior to the election of Margaret Thatcher, the Conservatives fully accepted the progressive post-war consensus - the set of policies which greatly reduced inequalities in the 30 years after World War Two. These policies included the extension of public ownership, a steeply progressive taxation system and a commitment to full employment. The key Conservative figure of this period was Harold Macmillan, prime minister from 1957-63, whose determination to close the gap between the rich and poor was formed when he was MP for the deprived area of Stockton in the inter-war years. If David Cameron really wanted to be a 'One Nation' Tory, which he professes to be, then he could find no better model than his fellow Old Etonian, Supermac.

Cameron's coalition partners, the Lib Dems, can also draw inspiration from great figures in their party's past - men such as John Maynard Keynes, William Beveridge and Lloyd George, whose 1909 'People's Budget' began the attempt to make a more equal society. Labour, too, need to discover their nobler traditions. Under the last Labour government, the gap between rich and poor continued to widen - with the income for the top 0.1 per cent of the population growing by 64.2 per cent in the period 1997-2007/8, compared to a growth of just 7.2 per cent for someone in the 50th percentile. If Ed Miliband is concerned about correcting that miserable record, he needs to think about the policies his party followed under leaders such as Clement Attlee and Harold Wilson.

The trouble today, of course, is that our political elite, even the ones who regard themselves as being left-of-centre, are the children of Margaret Thatcher, and not the children of Harold Macmillan. They've all been brought up to believe the dominant neo-liberal narrative that Britain in the 1970s was the "sick man of Europe" and that the country was only "saved" by the ditching of social democracy and the embrace of "free market" solutions, such as privatisation and tax cuts for the rich. And they've also been led to believe that pre-Thatcherite politicians such as Harold Macmillan and Harold Wilson, people who did so much to reduce inequalities, were somehow failures.

But over 30 years into the neo-liberal era, the costs of blindly worshipping the 'market' are there for all to see. Do we really want to see Britain's year-by-year transformation into Mexico, with a rich elite living in gated communities, the middle class reduced to poverty and a huge unemployed underclass? The choice is stark: either we turn the clock back to the 1960s and the progressive economic policies of that era, or we'll end up in the 1860s.